Examine the Explanatory Power of the SML Model to Estimate the Relationship Between Risk and Return in Identifying Growth Stocks and Value of Listed Companies in Tehran Stock Exchange

The present research which has been structured according to the reviewing the estimation of relation between risk and return in identification of growth and value stocks based on Fama and French models, aimed to study the representation of SML model for identification of growth and value stocks. Regarding the fact that the present study is one of application research from the respect of nature and one of the correlation researches from the respect of method, regression function of Fama and French model were estimated for two types of value and growth stocks. Accordingly, the hypotheses test of the research was determined. The result of value stocks model shows that the variables of market return and ratio of book value to market value has significant impacts on value stocks return in such a manner that market return has negative and significant impacts and ratio of book value to market value has positive and significant on value stocks return. The variable of the company size does not have significant impacts on value stocks return. Regarding the fact that there is a positive and significant relation between value stocks return and ratio of book value to market value, there is a significant relation between value stocks and points higher than SML line. The estimation results of growth stocks model shows that variables of market return, ratio of book value to market value and size of company have significant impacts on growth stocks return in such a manner that market return has negative and significant impacts on growth stocks return. Regarding the fact that there is a positive and significant relation between growth stocks return and ratio of book value to market value, there is a significant relation between growth stocks return and points higher than SML line.